Dos and Don'ts of Buying a Franchise

You’ve always wanted to be an entrepreneur, but the thought of starting a business from scratch is overwhelming.

In that case, you might want to consider becoming a franchise owner of a well established company. It will also give you much needed experience for your own business later. But there are a few Do’s and Don’ts you need to consider while buying a franchise. They are:

DO

Conduct a thorough research

Owning a franchise is easy, but owning the right one is the difficult thing. Be cautious of where you’re investing. Get as much information about the franchise as you can so that you can mitigate risk. Decide whether you have that kind of money and whether you’re willing to take whatever risks come your way. There are thousands of franchise offerings in the market and the only way to choose the best one is by investigating the chosen opportunity further. Attend trade shows if any organized by the franchise or contact a franchise agent. Don’t decide too soon. Get in touch with as many franchisees as possible. Compare with other franchises that are doing well, too.

DONT

Rush

In a bid to own a franchise quickly, don’t do away with your research, because that will certainly bring your downfall. Every good business decision requires timing, and perfect calculation of the risks involved. These will help you succeed.

DON’T

Spend more than you have

Established franchises like KFC, McDonald’s and Pizza Hut are the least risky options, but they also need heavy investment. Think it through. One, do you have that kind of money and two, if you do, by when you will be able to make it all back. Always have a buffer capital.

DO

Contact the current franchise owners

Talk to them, get to know how their franchise is faring. Are they doing well? Do they think it was a good investment? Are they making a profit? Would they recommend you get into the same business? Ask them as many questions as you can, of course without driving them nuts. How was the training provided by the franchise? Is the franchise available for support and providing technical assistance?

DON’T

Think you can do away with professional help

You will need a good lawyer to go through the complex legal documents prepared by your franchise. If you think you can save some money by doing it yourself, you’re making a big blunder. Have a good accountant go through all the franchise’s financial statements and projections. Get a thorough background check up done for any pending litigations, law suits or cases against the franchise. It is a question of your hard-earned money and you want to be absolutely sure where it goes. Go through the UFOC carefully. Understand your purchasing contract as well.

DON'T

Trust people too easily

It’s your money and time. Don’t take people’s word for it, or trust them too easily. Don’t take the easy way out and make sure you do everything to understand the business you want to get into. Also, don’t settle; don’t jump at the first opportunity that comes your way. Get into a business that you really want.